FFYF Capsule Collection: Tax Policy and Child Care

With two-thirds of children ages five and under living in homes where all available parents are working, child care is not optional for most families – it’s essential. 

Child care-related tax breaks can help parents offset the cost of care, benefiting working parents and young children while supporting economic stability across the country, but they haven’t been updated in decades. 

As Congress negotiates a tax reconciliation package this year, they have the opportunity to bring real relief to working families. Here’s an overview. 

In A Nutshell

The federal tax code has provisions designed to help offset the high cost of child care, including:  

• The Child and Dependent Care Tax Credit (CDCTC) is the only tax credit designed specifically to help parents offset the cost of child care. 
• The Dependent Care Assistance Program (DCAP) allows some working parents to set aside a small amount of their pre-tax paycheck to pay for child care expenses (including employer-sponsored child care contributions). 
• The Employer-Provided Child Care Credit (known as 45F) supports businesses who want to locate or provide child care for their workforce, while also increasing the number of child care slots available in their community.  

The House tax package included an expansion of 45F but missed the opportunity to modernize either the CDCTC or DCAP.

• From the FFYF statement from Executive Director Sarah Rittling: “Employers of all sizes have been eager to be a partner in addressing child care challenges and the expansion of the  Employer-Provided Child Care Credit (45F) speaks to this interest. However, 45F would be most effective when paired with the CDCTC…Without meaningful improvements to the CDCTC, this bill misses a critical opportunity to deliver real relief to families for whom child care remains one of the most burdensome monthly expenses.”

The Senate tax package includes enhancements to all three provisions currently in the U.S. tax code, including the CDCTC, 45F, and DCAP.

• This includes an expansion of the Child and Dependent Care Tax Credit (CDCTC) which would result in an increased benefit for nearly 4 million families. Under the proposed updates, many working families could see an additional $900 to help pay for the cost of child care. FFYF has details about how the Senate bill would improve all three tax credits with a handy topline one-pager here. 
•  In the statement from FFYF, Executive Director Sarah Rittling said: ““It is important to note that the three child care credits included in the Senate bill are most effective when paired together. Together, they help more families afford child care while allowing them to make the child care choices that best support their individual needs. And at a time when the impact of child care challenges is being felt in boardrooms and breakrooms alike, these credits will engage employers looking to be part of the solution.”

Support – Polling

• Support for expanded CDCTC in a national 2025 poll – 86% overall, with 83% of Republicans, 83% of Independents, and 91% of Democrats.
• Support for expanded 45F and DCAP in a national 2024 poll – 84% overall, with 76% of Republicans, 82% of Independents, and 93% of Democrats.

SUPPORT – LETTERS

• In May 2025, 64 local Chambers of Commerce, national organizations, and employers joined First Five Years Fund and the U.S. Chamber of Commerce in a letter calling on the Senate Finance Committee to expand child care tax credits — specifically the Child and Dependent Care Tax Credit (CDCTC) and the Employer-Provided Child Care Credit (45F) — as part of the tax reconciliation bill.
• In December 2024, 127 national, state, and local organizations sent a letter calling on the incoming Trump administration to support working families access to affordable child care by expanding the Child and Dependent Care Tax Credit (CDCTC).
• In August 2024, over 150 national, state, and local organizations, Chambers of Commerce and businesses sent a letter calling on members of Congress to make child care more affordable for working families by updating provisions in the U.S. tax code. 
• In January 2024, a group of 20+ national organizations signed a joint statement applauding the bipartisan Tax Relief for American Families and Workers Act of 2024 and calling on Congress to also modernize other existing child care credits – Child and Dependent Care Tax Credit, the Dependent Care Assistance Program, and the Employer-Provided Child Care Tax Credit – to help ease the tremendous burden of finding and affording child care for working families while supporting economic stability around the country.
• In January 2024, leaders of the Bipartisan Pre-K and Child Care Caucus — Reps. Suzanne Bonamici (D-OR),  Joaquin Castro (D-TX), and Ashley Hinson (R-IA) — sent a letter to the Ways and Means Committee urging them to modernize four existing child care credits – the Child and Dependent Care Tax Credit, Child Tax Credit, Dependent Care Assistance Program, and Employer Provided Child Care Tax Credit – to “provide immediate relief for working families and small businesses nationally.”
• In September 2023, a group of 85 organizations, Chambers of Commerce and businesses sent a letter calling on members of Congress to make child care more affordable by updating the U.S. tax code.

Tools You Can Use

• For a basic overview, this topline explainer shows how the expanded credits in the Senate tax package would help families. 
• These one-pagers provide a deep dive into three primary provisions, including: CDCTC, 45F, and DCAP.
• This side-by-side explainer compares the tax provisions and shows how they work together.
• And this document examines the differences between the Child Tax Credit (CTC) and the Child and Dependent Care Tax Credit (CDCTC) and why both are valuable for families with children.

Media